A Two-pronged Strategy by GST Council Panel to Restrict Fake Invoices

To resolve the issue of fake invoices the Law Committee of the GST Council has suggested a two-pronged strategy, as sources said.

As stated, the panel put forward a new online  registration process, which is similar to Aadhaar registration process, and through which the taxpayers got registered attaching their live photos, giving biometrics and with due verification of documents.

The registration facilities can be available at banks, post offices, and GST Seva Kendras (GSK), exactly like the Passport Seva Kendras or the Aadhaar Seva Kendras. The GSKs can prepare the new registration facilities purged from fake registration by working on the pattern of the Passport Seva Kendras and providing it with the required checks;

As sources said, the Law committee has recommended that in case the new registrants is going to initiate a non-Aadhaar authentication-based registration process, and they do not have any income tax return to support enough financial capability, they must go for compulsory physical verification and personal identification.  Also they may have to submit a recommendation letter by two taxpayers of adequate reliability.

Moreover, based on document supported credentials if a registrant or dealer comes under the "trustworthy" category, then he/ she can be registered within seven working days. If they are not in the mentioned category, they may be registered under conditional registration within 60 working days, only after physical verification of the business place, wherein_ in such cases_ input tax credit to their buyers shall be allowed only after filing of their return, and the dealers would be required to pay certain portion of their liability in cash instead of paying 100 per cent tax through ITC.

The sources in Department of Revenue said that "to put an end to fake dealers from the GST system, the panel proposed full application of the Business Intelligence and Fraud Analytics (BIFA) tool for precise identification of riskier dealers based on the riskier input supply chain and outward supply chain, abnormal taxpayer behavior in terms of ITC availment, tax payment for catching fake dealer and taking appropriate action, including enforcement."

It has suggested suspension of first lot of riskier traders and identification of such taxpayers on the basis of significant criteria including non-filing of return for six months, adding that the committee underlined that fact that there are about 6 lakh dormant registrants in GST.

Adding that the committee emphasized that there are about 6 lakh dormant registrants in GST, sources mentioned that the scheme suggested that lots of riskier traders and taxpayers should be suspended and indentified based on the significant criteria such as non-filing of return for six months.

It proposed that: "no income tax credential be given if 99 per cent tax is paid through ITC. There were about 35,000 such dealers who were given registration in 2018-19 and 2019-20, having GST liability of more than Rs 50 lakh (yearly), and more than 99 per cent tax paid through ITC and have no credential in income tax (did not pay income tax even of Rs 1 lakh in last three years)."
Sources stated that from the Law Committee's viewpoint "once a dealer is suspended, he has to explain the discrepancy within the prescribed time limit for revocation of suspension."

"It is urgently required to modify the GST Rules, when within only ten days of a nationwide drive against the GST fake invoice frauds, the DGGI and CGST Commissionerates have so far arrested 48 persons, including one woman and three chartered accountants, and have booked 648 cases besides identifying 2,385 entities," stated people in the know.